Considering a Medicaid Asset Protection Trust?

Medicaid Asset Protection Trusts: The Basics

When you transfer part of your assets to a Medicaid Asset Protection Trust, you can qualify for Medicaid assistance without losing any of the property or income you’ve likely spent years acquiring. To keep your assets from being counted as a potential penalty against you when you apply for Medicaid, they must be placed into an irrevocable trust. You should note however that these assets will be outside your control during your lifetime. If you are still able to revoke the trust, or have access to the trust funds, then the state is going to consider those funds to be assets you could gain access to pay for your own medical care. Some folks decide to create an income-only irrevocable trust, which is one that would continue to pay income earned by the trust assets on to the trust’s creator (also known as a “grantor”). Please keep in mind that this kind of trust income does count as income for the purposes of Medicaid eligibility, so you should be careful to limit this income stream to ensure that you remain eligible for Medicaid.

One very important thing to keep in mind when considering making use of any Medicaid Trust is to consider that your assets will be largely out of your control after the irrevocable trust is created. While you can also create a trust that allows you to change the names of any successor beneficiaries, you will not personally have access to these assets.

Through careful Medicaid planning, you may be able to preserve some of your estate for your loved ones while still remaining below Medicaid’s low asset limit.

One issue with transferring assets is the simple fact that you’ve now given them away. You don’t control them anymore, and even a trusted family member may now be likely to lose them. A safer approach may be to put these assets into an irrevocable trust. A trust is a legal entity where one person — a “trustee” — holds a legal claim to property for the benefit of others – known as the “beneficiaries.” A trustee must then follow the rules provided in the trust instrument. Whether trust assets are counted against the Medicaid’s resource limit will always depend on the exact terms of the trust.

Paying for Long Term Care Expenses

Long-term care is becoming incredibly expensive these days. Even if you and your spouse have saved carefully for years, long-term care can rapidly spend right through your savings, leaving you with very little support in your vulnerable older years. A newly published study on the costs of nursing home care or a stay at an assisted living facility showed that the average annual cost to stay in a private room in a nursing home is now about $92,378. Washington residents requiring specialized nursing home care will pay $107,675 for a private room, and $96,725 for a semi-private room. These costs are simply unaffordable for most families and many don’t realize they will need this kind of money.

While it’s easy to assume that you do not meet the low income and asset threshold to qualify for Medicaid (Apple Health) and its long-term care coverage, there are some ways to allocate your property which can make this crucial public assistance available to your family. One method you can use to hold onto assets you’d like to pass on to your loved ones while still qualifying for Medicaid is a Medicaid Asset Protection Trust .

When Should I Create a Medicaid Asset Protection Trust?

In order to fully gain the full benefit of a Medicaid Asset Protection Trust, you should get started on creating one as early as you possibly can. Medicaid does impose a five-year “look back period” on gifts received as well as the creation of trusts, which could impact your eligibility to receive benefits for a certain period of time depending on your specific state’s laws. Speak with a Washington State Estate Planning Attorney as soon as you can to determine your individual options for paying for long-term care while continuing to retain your treasured personal assets.

If you need assistance with an estate planning matter in Washington State or Idaho, contact our knowledgeable estate planning attorneys for assistance with your estate planning needs, by calling 509-328-2150.

Browse the Washington State Health Care Authority Trusts Section. Or check out our other article on Medicaid Planning Tips.